Some low-tiered markets are still suffering

S&P Indices publishes tiered price data for 16 of the 20 cities (MSAs) it covers. The tier breakpoints are price levels that divide recent sales pairs in each market into thirds. As we have noted in the past, home prices in cities do not behave the same across and within tiers. Over the past year in particular both Atlanta and Chicago have seen their low-tiered markets go into a steep decline.

In Atlanta, all three tier markets closely followed each other, both up and down, until about the middle of last year.  When the Atlanta market peaked in 2007, all of the tiers saw price appreciation of about 40% from their January 2000 levels.  Since then the low-tiered market has fallen sharply, far outpacing the decline in the other tiers particularly over the past 12 months.  The low-tiered market reached the lowest level in its 20-year history in March 2011 with an index level of 58.53.  As of May 2011, the level was only 60.22.

S&P/Case-Shiller Atlanta Tiered Home Price Indices. Sources: S&P Indices and FiServ.

The chart above shows that Atlanta’s low-tier market sees average home prices about 40% below what they were in January 2000, more than 11 years ago; whereas the high-tiered market is still about 9% above 2000 levels. Over the past 12 months alone, the low-tiered market fell by 38.1%, the high-tiered market fell 2.1% and the aggregate market is down only 4.6% over the same time period.  From their peak, Atlanta low-tiered home prices are down 56.4%, the high-tiered market is down 21.2%, and the aggregate market is down 24.6%

The Chicago market is displaying similar behavior patterns.  While the low tiered market had risen more than the others at its peak, the recent rate of decline in that market is far outpacing other home prices in that region. The low-tiered market reached its crisis low in April 2011 with an index level of 84.24.  As of May 2011, the index level was only 84.61.

S&P/Case-Shiller Chicago Tiered Home Price Indices. Sources: S&P Indices and FiServ.

The chart above shows that Chicago’s low-tier market is seeing average home prices about 15% below what they were in January 2000; whereas the high-tiered market is still about 15% above 2000 levels. Over the past 12 months the low-tiered market fell by 27.3%; whereas the high-tiered market fell by only 4.6% and the aggregate market was down 8.1%.  From their peak, Chicago low-tiered home prices are down 53.9%, the high-tiered market is down 27.9%, and the aggregate market is down 33.6%.

To put this into more perspective, compare what is happening in Atlanta and Chicago to San Diego.  San Diego’s low-tier market is seeing average home prices about 57% above what they were in January 2000; whereas the high-tiered market is about 53% above 2000 levels. In other words, since 2000 low-tiered prices have hung on to more of their value than the high-tiered market, completely different than what we see in Atlanta and Chicago. Over the past 12 months, the low-tiered market fell by 3.7%; whereas the high-tiered market was down 5.5% and the aggregate market was down 5.1%.  From their peak, San Diego’s low-tiered home prices are down 47.0%, the high-tiered market is down 31.9%, and the aggregate market is down 38.2%.

S&P/Case-Shiller San Diego Tiered Home Price Indices. Sources: S&P Indices and FiServ.

While all markets, and all tiers within those markets, suffered during the housing crisis, Atlanta and Chicago stand out as two where low-tiered home prices are still in steep decline.  Almost four years later, it seems that the sub-prime fallout is not over for these two markets. We are not even seeing signs of stability.

The posts on this blog are opinions, not advice.
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2 Comments

  1. Kevin Sinclair says:

    Is there a place where I can this kind of tiered home pricing indices for areas other than the 20 cities? Perhaps by state?

    Thanks.
    Kevin

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